Debates of May 15th, 1995

Old Age Security Act

[Brian Tobin, Liberal, Humber—St. Barbe—Baie Verte, NL]

Mr. Speaker, I missed the first vote of the day. If the question now being put applies to the first vote, of course I shall cast my vote with the government.

[David Collenette, Liberal, Don Valley East, ON]

Mr. Speaker, the same applies for me.

(The House divided on the motion, which was agreed to on the following division:)

[The Speaker]

I declare the motion carried.

A motion to adjourn the House under Standing Order 38 deemed to have been moved.

[Vic Althouse, NDP, Mackenzie, SK]

Mr. Speaker, on May 8 I rose in the House and asked the Minister of Transport to explain why the government appeared to have changed its policy outlined in the red book of resisting U.S. influence in the economy and in our nation by leaving the share offering that he was proposing in his commercialization bill for CNR open to foreign purchasers.

In the minister's response he said: "I have not seen any major changes in the way Canadian Pacific Railway operates and handles its shipments, as opposed to CNR". With that, he apparently was attempting to justify the fact that on a one time only offering of shares for ownership and control of CNR it would somehow come out with a similar kind of shareholding as Canadian Pacific.

I think the minister failed to recognize that Canadian Pacific began under the guidance of the government of the day and that there was an initial policy of Canadian ownership and control, even though some of the capital came from Great Britain and the United States. That tradition of existing shareholders, ownership, and control continues. It is not very likely that the balance of control over CPR would change overnight, as is possible with the CNR commercialization offering, because the shares will be offered all at once. If there are no Canadian bidders or purchasers it could conceivably all fall into the hands of foreigners, with the only control being that no one purchaser could hold more than 15 per cent.

I noticed that when the group that investigated commercialization for the government looked at it, they were attempting to answer the question of how competition could be encouraged to ensure that pricing and outcomes are not affected by the duopoly nature of railways in Canada. They were also asked to describe how the rationalization and abandonment process could be improved to ensure that efficiency and equity are addressed.

It seems to me that the proposal I put forward of putting the first share offering directly into the hands of farmers, because the amount of money is roughly the same as what is going to be netted from CNR after the brokerage fees are taken off and because the government had already decided to allocate $1.6 billion toward that end-that a different use of those funds would in fact allow for true competition because the users would then be the owners of the railway and it would be in their own interests to keep the prices for the service of the railway as low as possible. This would in fact force a new, never before seen kind of competition onto the rail sector in this country.

I cite as an example the kind of competition that resulted on the prairies in the elevator system in the teens and twenties, when farmers began taking over the ownership of government owned elevators at that time and the elevator system became truly competitive. For the first time in 20 years of buying grain, a truly honest, fair weight and fair pay were given.

This is the kind of thing we could expect if the government would accept the proposition that there are other ways of commercializing CN that would put full control directly in the hands of the users not just of owners.

I stress to the government that the question of control is even more important than who owns CN, the people who decide who will be the board of directors. Those directors would be making the decisions to operate the company afterward. If those directors had to respond and be responsible to the users, the resource industry which in this case would be the farmers, it would be a big step toward true global competitiveness.

The minister has said that he does not think farmers want to own CNR. He said outside the Chamber that he has some doubts they would be able to operate the CNR. I point out that they have a lot of experience outside of farm operations which has proven to be very beneficial to them, their communities and the economy. These have become very much commercial operations. This has held the farming and rural community in good stead.

For those farmers who do not wish to continue to hold shares in CNR, it would be very simple for them to sell the shares. I am sure that other resource users such as mines, timber businesses and sulphur shippers would be interested in buying shares, as would the initial farmer shareholders. As well, some port cities would be interested in owning shares that might become available from the farmers who wish to retire and dispose of their CN assets. There would be quite a diversified ownership of the company.

Most important, because those shares would come on the market slowly and not in 100 per cent blocks as is the proposition the government is putting forward, it would be highly unlikely that foreigners would quickly get to own and control the CNR.

It is especially important that when the east west policy is fully abandoned by the government, the natural flow will be north and south. The proposition of U.S. railroads and shippers ending up controlling the second railway in this country is not a prospect I who represent shippers in western Canada look forward to.

[Joe Fontana, Liberal, Parliamentary Secretary to Minister of Transport]

Mr. Speaker, this government's objectives are to put CN on a viable footing so that it maintains competitiveness with other carriers and to maximize the value of the sale of CN's shares to Canadian taxpayers.

To achieve maximum value the broadest possible distribution of shares is necessary. The initial public offering of CN will be the largest such issue in Canadian history. The Canadian equity market may not be large enough on its own to absorb such an issue of this size.

To ensure the divestiture of all the government's equity in CN at maximum value, markets outside of Canada will need to be assessed. The United States in particular will be an important market. Its numerous investors are familiar with the rail renewal and revitalization which Canadian railways and CN in particular are undertaking. Foreign ownership restrictions could jeopardize the participation of these investors.

Canadian rail policy does not restrict or prohibit foreign ownership. More than 30 per cent of CP's limited shares are owned abroad. By not limiting foreign ownership for CN it ensures a level playing field between both CN and CP in their ability to raise equity capital in global financial markets.

The government's financial advisers agree that a foreign ownership limit could reduce the potential size of the issue and would reduce the price. Limits could also prevent the government from selling the majority stake. Given the size of the share offering, a successful issue would be endangered if the potential shareholder base was limited to Canada.

While shareholder investment thresholds under the Competition Act and Investment Canada Act could conceivably have provided sufficient safeguards against an unwanted foreign takeover, the proposed 15 per cent limit on individual share ownership also acts as an effective constraint on foreign control. Past experience with Canadian initial public offerings indicates that foreign sales are unlikely to approach, let alone exceed, 50 per cent.

[The Speaker]

Pursuant to Standing Order 38(5), the motion to adjourn the House is now deemed to have been adopted. Accordingly, this House stands adjourned until 10 a.m. tomorrow, pursuant to Standing Order 24(1).

(The House adjourned at 7.30 p.m.)